Apollo’s Discount IPO

One thing the stock market has in common with the art market is a very strong allergy against primary-market offerings which have fallen in price from the last time round. It’s one of the reasons why gallerists invariably sell their artists’ work well below the secondary-market price: they want to leave enough room so that they can be sure to be able to raise that artist’s prices at her next show. And the same thing goes for companies: each round of fundraising, from angel to VC to IPO to secondary offering, is generally priced at a significant premium to the last, and it’s a sign of desperation and/or distress when a company raises equity at a lower price than it has in the past.

None of which, it seems, is something which keeps Apollo’s Leon Black up at night. He’s going public, despite having privately listed his stock at a higher price:

Apollo had already broadcast its intentions to list publicly, having traded on a private Goldman Sachs Group Inc. exchange since last summer. Those shares are down more than 40%.

Since it’s inconceivable that the IPO price will come at a 67% premium to the price at which Apollo is trading on the Goldman exchange, investors who bought in early are going to look a little foolish, or at best unlucky.

But I’m glad that Apollo has made this decision, if only because the convention that each equity round has to be priced higher than the last serves no useful purpose. Leon Black is rich and powerful enough to be able to ignore it; with any luck, other corporate executives will increasingly follow suit.